Our Analytics 2 june — 16:02

Oil collapse: What will happen to us? (Our comment)



The global economy is reeling again. Trade wars are gaining such a turn that they can soon reach the point of no return. And as a logical result of all this, oil in the world market has again begun to lose in price, moreover, in recent days we have seen a real collapse of oil prices. An analysis of the course of events in the market allows experts to build the most disappointing forecasts: oil prices can drop to $40 per barrel and below. And this does not promise anything good to Azerbaijan, for the country's economy still remains dependent on oil.

This is evidenced by the latest statistics. According to the Centre for Analysis and Communication of Economic Reforms, in the first four months of this year, Azerbaijan's exports amounted to $7.1 billion, which is 25.6% or $ 1.4 billion more than in January-April last year. During the same period, non-oil exports amounted to only 583 million dollars. However, at first glance, this means an increase of $98 million, or 20% over the same period in 2018. But in the total export volume, the share of the non-oil sector continues to be scanty: just over 8%.

And no matter how you look at it, the picture does not change. The main revenue for four months from non-oil exports accounted for cotton, hazelnuts and tomatoes. The same Centre for Analysis and Communication of Economic Reforms reports that for this period, the bulk of cotton in the export structure was cotton, which amounted to $57.9 million, a 2.9-fold increase. Exports of peeled hazelnuts amounted to $53.7 million, with a growth of 76.6%, and tomatoes - $ 49.6 million and 16.7%, respectively. At the same time, there is a decline in some types of non-oil sector products. Thus, electricity exports amounted to 45.1 million dollars with a decline of 4.7%. Exports of polyethylene fell by 17.4% and amounted to 28.9 million dollars, and persimmon by 5.7% to 5.7 million dollars. And let the reader not be surprised by the sharp increase in exports of polypropylene by 71.5 times ($28.6 million) and methanol by 7.3 times ($19.1 million). These are new types of products that have recently been launched in the country. The export of alcoholic and non-alcoholic beverages also increased by 2.5 times compared to the same period of 2018. But its volume was only 9 million dollars.

And if it is still possible to argue about these facts, another message from the Centre for the Analysis of Economic Reforms and Communications will help put the final point on this issue. Thus, the total volume of exports of non-oil products from Azerbaijan by 20 large state and private companies in January-February 2019 amounted to $329.77 million. And the largest exporter of non-oil products in Azerbaijan among state-owned companies has once again become the Marketing and Economic Operations Department of SOCAR. The volume of exports of MEOD amounted to 60.3 million dollars (among private companies the leader is MKT Istehsalat Kommersiya LLC - 37.5 million dollars).

And the rest of the state and private companies are significantly ahead of the SOCAR MEOD. For comparison, we present the export volumes of state-owned companies that are among the largest non-oil exporters. This list is headed by Azerenergy OJSC, which exported products for four months at $45.1 million. Next are Azeraluminum LLC with a volume of $26.8 million, AzerGold CJSC ($17.9 million), Azerpambyk Agro-Industrial Complex LLC ($6.9 million), Azerbaijan Airlines ($5.9 million ), LLC CTS-Agro ($3.9 million). And the export volumes of the State Agency for Material Reserves, Azeripek, and the Baku Oil Machine Building Plant OJSC vary within a few hundred thousand dollars.

How is the situation in the private sector? The list of the largest private companies exporting non-oil products is headed by SOCAR Polymer, which exported products worth $30.3 million over four months. The company name speaks for itself. And in general, polyethylene, polypropylene, methanol and other products manufactured by SOCAR enterprises cause a lot of discussion among experts. Many of them, including the heads of large government agencies (although in informal conversation), say that the share of the oil sector in total exports of Azerbaijan is no less than 96%, almost understating the already low share of the non-oil sector in total exports.

But our goal is not to 'unload' SOCAR of non-oil products. The State Oil Company is doing a good job with the task, though not quite relevant for it. But the looming new global crisis, and, first of all, on the oil market, leaves no room for doubts: it is urgent to take on the non-oil market. If our non-oil sector in the shortest time does not have time to quickly restructure, no one can guarantee the country from new shocks.

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